Posted by: Josh Lehner | July 11, 2019

Migration to Oregon, an Update

In recent months we have discussed the big picture outlook for labor supply, the silver tsunami of retirements, how migration is slowing but remains the key driver of population gains, and how birthrates are dropping and deaths are rising. However, what we haven’t done in some time is update the nuts and bolts on migration. Lately, I have been getting requests for presentations on migration and what follows largely stems from updating some of our office’s standard charts. For more on migration and how it impacts Oregon, see Mark’s Destination Oregon presentation from a few years ago.

First, our standard population chart we include in every presentation we give shows both the number of new Oregonians each year and the growth rate. Even as migration flows returned in the recent years, Oregon is a larger place today so the growth rate remains lower than what we saw in the 1970s and 1990s.

In terms of who moves to Oregon, it is important to keep in mind that migration is for the young. This goes for both those moving into Oregon and those moving out of state. And while Oregon does see a net gain from all age groups, 20- and 30-somethings account for the lion’s share. Our office pays particular attention to those in their root-setting years as this is when most people begin their careers in earnest, settle down, get married, have kids, and buy a house. This matters economically because the 20- and 30-something represent an influx of young, skilled labor for local businesses to hire and grow their operations.

In terms of where migrants are moving from, it typically is everywhere in the country except for Washington. In good times and in bad, more Oregonians move to Washington than Washingtonians move to Oregon. Some of this is likely due to tax policies, but some of this is also the classic suburban play, both of which are greatly influenced by our largest population center being located on the border. Overall, 30-40% of in-migrants typically come from California and then Oregon gains a little bit from every other state. The California migrants disproportionately locate along the coast and in central and southern Oregon. Migrants from other states tend move in patterns similar to overall population in the state, so mostly to Portland and then the other urban areas as well.

Now, among the non-West Coast states, the specifics do vary from year to year and even across data sets. I tend to focus less on any given year and look across time to see larger patterns. The reason is we will occasionally see a big gain from North Carolina or a big loss to Louisiana, but those are not typical and are blips along the way. Additionally different data sets vary as well. Over the past decade the ACS shows mostly losses to Arizona and gains from Idaho, while IRS migration statistics show the exact opposite pattern. Update: In the comments Guy mentions that IRS is probably a better data set given it covers the majority of the population. The ACS is based on a sample and is inherently more noisy. The advantages of the ACS is getting the characteristics of migrants (demographics, employment, income, etc) which the IRS data lacks.

Looking across the state shows which counties are gaining or losing population to other Oregon counties and that nearly all are gaining population from other states. Again this is just a single snapshot in time. Earlier in the expansion, nearly all migrants within Oregon were moving to the Portland MSA as that’s where all the job growth was occurring. Today, as the economy is growing everywhere, migration patterns are a big more spread out and 2 of the big 3 Portland area counties saw net out-migration to other Oregon counties. This is also not typical, but shifts like this are something our office is keeping an eye on. Similarly, Oregon counties rarely experience net out-migration to other states, as such the losses in Harney, Morrow, and Umatilla are likely more noise and less signal but worth monitoring moving forward.

Finally, a friend of our office asked about returnees to Oregon. Or are we seeing more people move back to Oregon after leaving the state earlier in their lives? We lack good data on this but Census data does show which state someone was born in, where they lived last year and where they live this year. This is an incomplete picture of someone’s life, obviously, but it is the data we have available. What we see so far in the Census data is returnees to Oregon are pretty steady both in number and as a share of all in-migrants to the state. Over the past few years 1 out of every 6 migrants to Oregon were born in the state. This includes the fact that 1 out of every 8 Californians moving to Oregon were actually born in Oregon as well.

Posted by: Josh Lehner | June 28, 2019

Friday Beer Thoughts: Industry Dynamism

The beer industry’s slowdown and rising number of closures continues to draw attention. Both Andre Meunier in The Oregonian and Jason Notte in Portland Monthly have really good, local articles in recent weeks. In talking with them and getting updated OLCC data, I have been digging into the latest trends. Over the summer I want to highlight a few of the findings in an occasional series. First up is a look at economic dynamism, or the number of startups and closures.

The low startup rate across the economy has researchers worried. Long-run economic growth typically comes from new ideas and innovations that improve efficiencies and raise productivity. For a variety of reasons, new companies are usually best able to bring these innovations to market. The concern is that without more startups, productivity will grow slowly, keeping a lid on wages and overall economic growth.

Beer is clearly one industry that has bucked the startup trend. However if we look at economic dynamism overall — both the number of startups and the number of closures — beer really isn’t all that different than the rest of the economy. And while we celebrate startups and their innovations, the creative destruction process really is about both ends of the pipe. The closure of less productive, or less responsive firms to changes in the market is an important component to economic growth and productivity. Of course closures, or failures, are terrible for workers, so having adequate training, job placement, and safety net programs is needed.

Now, the fact that economic dynamism is the same in the beer industry as in the typical industry may be surprising. But this can be misleading and due to offsetting factors that we already knew about. The beer industry’s startup rate in Oregon is 40% higher than the economy overall while the closure rate is half that of the rest of the economy. So, on net the overall dynamism is similar but the composition completely different. The question here is how long can these differences last?

The next chart turns these rates into actual brewery counts. Over the past 5 years Oregon has seen 136 new breweries start producing beer, while 40 have ceased operations. On net, Oregon has added nearly 100 breweries in just the past handful of years.*

The beer industry changes seen in every corner of the state is one item that stood out to me. I’m of two minds here. On one hand, every region has seen strong growth in the number of breweries and has also experienced churn. On the other hand, the regional variations are interesting to note as well.

The Portland area is the most dynamic in the state, even in recent years. But who knew that Southwestern Oregon (Coos, Curry, Douglas) has effectively matched the growth and dynamism of Portland over the past 5 years? Or that the suburbs experienced stronger growth and more dynamism than Portland proper? Click here for county-by-county data on startups and closures. Note that the U.S. is off the chart below in large part due to most states playing catch up to Oregon. The industry is clearly spreading out and is no longer confined to a few beer hotspots.

Some final thoughts.

The big question moving forward is to what extent can this continue. Obviously it is hard to say. There are variations across industries, but rarely do we see extreme outliers persist indefinitely outside of monopolies or the like. Specifically I am watching the brewery closure rate. I suspect it cannot remain half that of the overall economy forever. But to get more closures, a few other dominoes need to fall.

In terms of trying to think through the dynamics of a potential bubble and its bursting, I’d first look for market segment saturation (craft beer as % of total beer, beer sales per adult, etc). Next I’d watch the number of startups into that saturated market. After that I’d look for increased price competition as firms struggle to get their slice of the pie. Now, even in a healthy market all of these dynamics are at play every day for individual firms trying to maintain or growth their marketshare. But these dynamics, to me, are some of the key trends to watch for the industry overall.

Now, most of the post above, and the way we typically talk about the beer industry is all based on the number of breweries. What really matters is the volume of beer produced and consumed. In the next post we will look into this a little bit and try to gauge whether we really are at Peak Beer, at least relative to local demand. In a later post, I hope to dive into industry clusters and tourism.

* Note that these counts are based on the actual number of breweries submitting tax returns to OLCC and not based on something like the number of permitted breweries or trade group figures. These counts also involve judgement calls. Some breweries with multiple locations report production separately, while others do not. I do my best to combine figures for each company and do not look at each establishment alone. The one exception being McMenamins which really operate more as a chain of brewpubs. I count each McMenamins that brews beer separately, but do not count the non-brewing locations.

Posted by: Josh Lehner | June 18, 2019

On the Rise: Single-Person Households

The other week The Wall Street Journal had a fascinating article on the rise of single-person households and how companies are offering and redesigning products to better meet the needs of individuals rather than those of, say, a family of four. Research and consumer spending shows that individuals are willing to pay more per ounce of condiments in a smaller bottle than to buy the giant bottle. Similarly, the warehouse club package of toilet paper is not the right size for a household of one, even if it technically provides the best bang for your buck. Do read the article as it has great information regarding how demographic shifts impact businesses, open up new market opportunities and the like.

However, while the article does try to provide a demographically-balanced tone, I was struck by the primary focus being on young, urban individuals. This may be because they are the most lucrative market opportunities for businesses or that they play a key role in population growth in close-in neighborhoods. Plus, telling the story of financially independent and seemingly successful individuals is overall a positive lens to view demographic and societal changes. But there’s just one issue with this framing. There are more single-person Baby Boomer households today than Gen X and Millennials combined. Talking about delays in household formation, marriage, and births is all well and good and I am guilty of this all the time. However, focusing just on these trends can really misses the forest for the trees.At some point near the middle of the century, single-person Millennials households will overtake their older neighbors in absolute terms, but not for decades to come. The biggest reason for this is where each generation is in their life. In the decade ahead, Millennials will be in their peak family years, or when the share of single-person households is at their absolute lowest. Gen X will begin aging out of their peak family years and into their empty nest years. While Baby Boomers will see an ongoing rise of single-person households, largely due to unpleasant conversation topics including a growing number of divorcees, widows and widowers.

Another factor at play for all ages is the trade-off we face when it comes to housing costs and personal space. It is cheaper to live with roommates, but if we can afford it, we do tend to prefer a bit more privacy and the like. Living by yourself certainly does not have to mean social isolation.

These shifts will have tremendous impacts on the economy and society at large in the decades ahead. More families increases the demand for childcare and education, for example. And a growing number of older households increases demand for caregivers, social workers, assisted living facilities and the like.

But these shifts also have big impacts on housing markets.

  • If we look at the past decade, the growth in single-person households aged 55 or older accounts for 1 out of every 2 new households in Oregon, if we net out the changes across demographic groups. In the Portland region, they account for 1 out of every 3 new households.
  • Our advisors in recent years have noted if you look internationally at places with older population, housing demand actually increases due to changes (declines) in household size.
  • We are clearly seeing this today. Over the past decade the change in the share of older single-person households is equal to 2-3 years worth of new construction in Oregon. As such, supply needs to increase more than it has in the past to account for aging demographics. Offsetting this somewhat, however, are lower household formation rates among younger cohorts.
  • Like society at large, most single-person households are homeowners. According to the American Housing Survey, in the Portland area the average single-person homeowner aged 55 or older lives in a 3 bedroom house they moved into in the late 1990s.

All of the above has led some to conclude that we do not need any more single family homes. We just need to better allocate our existing single family homes to match the needs of households. I, personally, do not believe the first part. Surveys and buying habits continue to show a lot of people do want single family homes. However, I am also on the record noting that one of the benefits of missing middle housing is it better allows aging in place. The way this happens is more options within existing neighborhoods and communities means households and individuals can right size their housing type as their needs change without severing social ties. This is of particular interest because we know that the vast majority of people do not currently downsize; they live in their home until they pass, or move to an assisted living facility in their 80s or 90s.

Finally, a few months ago we had an advisors meeting that focused primarily on homelessness and we were able to bring in speakers to address and educate us on the issue. One of the ideas advocated for and discussed at that time was the concept of providing a property tax incentive (rebate/discount) for someone who shares their home with, or provides a room to a low-income neighbor. The idea being it could be a win-win in the sense that it would open up more housing units for lower income residents to live, and could financially assist homeowners struggling to make ends meet. I know this concept is currently being discussed in the Legislature and our office is not advocating for or against any particular policy. However given it was a topic of conversation in a recent meeting and ties in conceptually with the growing number of single-person households, I just wanted to highlight it as one possibility.

Posted by: Josh Lehner | June 11, 2019

We are Hiring an Economist, Come Work with Us!

Our office is currently hiring an economist. This newly created position will work with us on all of the research projects and various forecasts our office produces. This ranges from jobs and population to business taxes and crime rates.

We are looking for a new colleague who is as interested in data and research and is as curious about improving both as we are. Do not be scared off by any lack of forecasting experience, but do apply if you have that! Overall we want to work with you if you have analytical skills and are curious to learn how our office approaches research projects, engages stakeholders, and communicates our findings to policymakers and general audiences alike.

This position is designed to be a stepping stone to a senior economist or research position or to gain real, hands-on experience before graduate or professional school.

See here for the official job posting and to apply

Details

Location: Salem (with some telecommute options once you are up to speed)

Pay: $54,800 – $77,000 annually

Deadline to Apply: June 29, 2019

If you have any questions or wish to discuss the position in more detail, please do not hesitate to reach out.

Posted by: Josh Lehner | June 4, 2019

Eugene-Springfield Economic and Housing Outlook

This morning I am part of the Springfield Chamber of Commerce’s State of Business Breakfast. Also presenting are Caroline Cummings of Oregon RAIN and Mark Gregory of Oregon SBDC. Should be a great event. My presentation focuses on the statewide economic outlook but I have incorporated some local material as well. What follows is some Lane County specific information.

Like Oregon overall, job growth in Lane County has slowed in recent years as the regional economy begins to approach full employment. However, as we have discussed before, Eugene-Springfield underwent major structural changes during the Great Recession. In particular the manufacturing losses of the RV industry and the chip plant still weigh on economic data today.

The university is a stabilizing force employment-wise and a source of growth overall with rising enrollments increasing consumer spending and spurring new construction.

All of that said, it’s really every other sector driving growth in recent years. These gains are broad based. The regional economy is at an historic high for jobs and the previous jobs gap — difference between the number of jobs and growth in the potential labor force — is effectively closed.

Importantly, economic growth in recent years has finally translated into real income gains. Local drivers of growth mirror statewide patterns. These gains are all about the labor market. More Lane County residents are working, for more hours, and for higher pay. Local inflation-adjusted incomes are back to where they were in the late 1990s and at the height of mid-2000s expansion. When the 2018 Census data is released this fall, I suspect Lane will have reached an all-time high on incomes as well.

Looking forward, the Lane County economy has never been more diversified. Keep in mind that this measure compares the local mix of industries to the nationwide patterns. As such, when a line moves sideways, it means the local economy is diversifying at the same pace as the nation.

Lane County is home to a very high concentration of timber-related firms, in addition to the university, plus a thriving beverage manufacturing sector (mostly breweries). These all stand out when looking at the local industrial structure.

On the flip side, Lane County has relatively low concentrations in finance (Oregon is not a financial hub), construction (slower population growth, but as we will see in a minute, still not enough construction), and professional and technical services (high-wage, white collar jobs).

For more on industrial diversification and the outlook, please see our previous work. But the main point being that a more diverse economy is better able to withstand different types of recessions. Having one key industry is great when that industry is booming (Timber in the 1950-70s, e.g.) but a region suffers considerably when that sector has fallen on hard times. If the proverbial eggs are spread across more baskets, it means when one basket goes down, the rest are better able to withstand the loss and recover.

Lastly, there are two ways to diversify. A region can add more jobs in industries that did not have a large local presence. Or a region can lose jobs in a sector they specialize in. Both types occur and Oregon’s more diversified economy today is not just due to new job growth. While Lane County still has 10x the concentration in timber-related jobs compared to the nation, it used to be 20x the concentration a generation or two ago. As such, the decline of the timber industry and job polarization overall have made Oregon and Lane County’s economy more like the U.S.

The keys to longer-run growth are demographics and housing. The Eugene-Springfield MSA is expected to continue to grow, but at a somewhat slower pace in the years ahead. The regional economy will face the same demographic headwind the rest of urban Oregon, and the Willamette Valley faces. Working-age population growth will be positive, but slower than total population growth as the Baby Boomer retirements weigh on the local workforce numbers. As discussed before, there are some discrepancies between local demographic forecasts, suggesting Lane may have more demographic upside risk than most.

All of that said, the region will still need to build significantly more housing in order to accommodate gains seen in recent years and their future neighbors in the years to come. Taking Portland State’s population forecast and turning it into household projections reveals Lane County needs to build around 1,400 units per year in the decade ahead, even with a moderate recession (solid lines). While this level of new construction, or more, was seen basically every year throughout the 1990s, the last time Lane permitted this many units was 2006. And the past decade hasn’t been close. More new construction is a must.

Today Lane County, like Oregon overall, is building 1 new housing unit for every 3 new residents. Historically we built 1 new unit for every 2 new residents in Oregon. At some point, something has to give here. So far the answer to that something is affordability. The concern is that affordability could put Oregon’s comparative advantage at risk, or our ability to attract and retain working-age households. 

For more information on Lane County’s economy, see the great work that Employment’s regional economist Brian Rooney does.

Posted by: Josh Lehner | May 29, 2019

Oregon Births and Deaths, Part 3

Previously in Part 1 we looked at the big picture for Oregon births and deaths and across counties. In Part 2 we explored the declining birthrate. Today in Part 3 we will look at the rise in Oregon deaths, which are expected to outnumber births by the middle of next decade. As with the low birthrates, the rising deaths are a nationwide trend and not necessarily unique to Oregon.

An aging population accounts for much of the increase in the number of deaths. However in recent years, deaths are rising a bit faster than expected. While there are myriad causes of death, and I’m certainly no doctor or coroner, there is at least one clear trend pushing back on medical advancements and it ties in with the economic literature. But first let’s start with a high level look. After falling for decades, mortality rates are no longer declining for the working-age population in the past 10 or 15 years. Life expectancy is slowing down or even stagnating as a result.

It is possible that we have reached the limits of medical care and are at a lower bound for mortality. It could be other causes of death that are harder to treat with medicine pushing back on mortality improvements. And we do see some of this. In particular, as vehicle miles traveled rebounds in recent years, so too have driving-related deaths. That said, health-related deaths are also a mixed bag. There are ongoing improvements in cancer-related deaths, signaling medical advancements are not tapped out. But offsetting these gains are increases in deaths due to high blood pressure and diabetes, which may be tied to rising obesity rates.

All of that said, the lion’s share of increasing death rates is even darker. Nationwide and here in Oregon we are experiencing a rise in the so-called “deaths of despair,” or those due to alcohol, drug overdoses, and suicide. This is a phrase coined by Princeton economists Anne Case and Angus Deaton. I cannot do this research justice here, so please read their paper. But I can show you the increases in the past decade or two. Today, depending upon the age group, such deaths account for 10-50% of all deaths in Oregon, essentially double the share from 15 years ago.

Note: Poisonings are largely drug overdoses and the rise is tied to the opioid crisis. Chronic liver disease is largely about heavy drinking. The research overall focuses on white, non-Hispanics as the rise in these deaths is most pronounced among this demographic, particularly over the past 20 years. In recent years, these increases are more widespread across racial and ethnic groups.

It is clear that the rise in “deaths of despair” are not confined to the Rust Belt or Appalachia or wherever most of the media reports have focused in recent years. They are more acute there, but the rise is seen nationwide. Here in Oregon, unfortunately, we see higher rates of death due to heavy drinking and suicide. These issues are not only bigger here, they are also rising over time. In the big picture, both Oregon and Washington have higher rates of the “deaths of despair” but the increases over time have been slower than in most other states.

The big reason for that is the stabilization seen in drug overdoses in recent years. To be sure, Oregon sees more deaths today than 20 years ago, but these types of deaths are no longer rising like elsewhere in the nation. I think this highlights a clear policy and public health win here in Oregon. You can see this on the Opioid Data Dashboard from the Oregon Health Authority. After Oregon created the prescription drug monitoring program, the opioid prescription rate has dropped by 25-30 percent and pharmaceutical opioid-related deaths are down too. That said, while the pharmaceutical ones are down, we are seeing a rise in synthetic opioid deaths due to fentanyl and the like, which is a growing problem everywhere. Additionally, higher usage of naloxone is able to save those who overdose and while findings are somewhat mixed, legalized marijuana may also help with opioid and drug-related addictions and prevent subsequent deaths.

Now, while we see some clear improvements in the past decade here in Oregon among the prime working-age population, these seem to be confined to just a couple age groups, unfortunately. If we look at total “deaths of despair” by age group in Oregon compared to the nation, we see very similar trends for teenagers and for the age cohorts 55 and older (not all shown here). These charts also show the increases among our communities of color in recent years.

Now, the reason our office began digging into this work was not just due to the rising number of deaths impacting the population forecast, nor the landmark Case and Deaton paper, but as part of the big picture issue of labor supply. As we wrote a couple years ago, we have seen a rise in the number of Oregonians saying they are not looking for work due to illness or disability. Given there was not a corresponding rise in the actual number Social Security Disability payments, it is an open question just what is going on here. How much of it is a genuine public health crisis, in part due opioids and the factors leading to “deaths of despair”? Clearly these issues are impacting the population even if they are unlikely the leading cause of lower labor force participation rates.

Finally, this research is still very new and ongoing. Case and Deaton did a great job of pioneering the work, laying out their data and methodologies and even advancing possible hypotheses as to why these increases are occurring. However, what is clear from the work, including a number of recent papers from other authors, is these deaths are not directly tied to current economic conditions. This is the biggest misconception about this research. Someone does not lose his job today and die tomorrow of liver disease. It takes a long period of heavy drinking for your liver to fail. The initial factor behind these behaviors or cause of depression may be economic-related in some cases, but these tragic outcomes are years in the making.

As such, Case and Deaton stress a long-term, cumulative impact. They highlight a few possible factors, but, overall no clear consensus has been reached in determining just now much each may or may not play a role. The factors listed include the break down of social institutions including marriage, manufacturing, unions, religion, in addition to overall economic conditions and stress. In a presentation with the Legislature a few years ago, former Representative Barnhart, himself a former psychologist, noted that these outcomes may stem from depression. And the late economist Alan Krueger, who recently took his life, studied pain medication usage among adults, how they used it to cope, and how it impacted their daily lives.

Clearly this topic and underlying issues run deep. It is not just about whether someone has a job today or not, even as economic conditions likely play a role somewhere along the way. As such it is more about human behavior and societal changes, which can be harder to understand and in cases like this, more uncomfortable to talk about. However, the increase in the number of deaths that are not due to an aging population has a big impact on the economic and demographic data that our office uses. More importantly, the considerable rise in the “deaths of despair” has a big impact on our lives and those of our friends, colleagues, and neighbors.

For more, see the Oregon Health Authority for detailed data on Oregon’s vital statistics including a life expectancy map by census tract. OHA also has a lot of resources regarding suicide prevention, substance use, using naloxone to save a life, county mental health services and more. The Governor’s Opioid Epidemic Task Force in recent years has been working on ways to improve treatment in addition to possible regulations and policies.

Posted by: Josh Lehner | May 23, 2019

Oregon Births and Deaths, Part 2

Part 1 looked at the natural increase in Oregon’s population, how it is expected to turn negative next decade and how half of Oregon counties already see deaths outnumber births. Today in Part 2 we will examine Oregon’s relatively stable, or stagnant, total number of births which is expected to continue in the decade ahead.

Birthrates increased nationwide from the 1970s through the 1990s. On the eve of the Great Recession, the U.S. had replacement rate fertility (2.1) and here in Oregon we nearly did as well (2.0). However, since then the birthrate has fallen considerably, particularly in Oregon and across the West. Initially, it was thought birthrates would rebound along with the economy. However, even as the economy has improved, not only have birthrates not picked up, they continue to fall further. Today, Oregon is a half a child below replacement rate (1.6 in 2017, data is not yet final for 2018), and the U.S. nearly so (1.7 or 1.8). While Oregon has one of the lowest birthrates nationwide, similar big picture trends are seen throughout the country.

Lyman Stone, an economist who writes about demographics and population, notes that such a decline is not yet at as pronounced as Russia’s decline in the post-Soviet era, but it is on par with birthrate declines seen in Canada, France, Japan, and Sweden. None of these countries have regained replacement rate fertility.

Now, the hard questions are why has this happened and why should we care?

Lets start with a couple reasons why this matters. Fewer children means fewer workers in the coming 20-60 years. This will result in slower economic growth. As discussed recently, demographics are already weighing on the economy quite a bit and will continue to do so in the decade ahead. Continued low birthrates will weigh on growth further into the middle of the century. Demographic imbalances may also make it more challenging to take care of older adults. From a labor perspective this includes staffing for long-term care, while from a fiscal perspective the increased challenges on Social Security.

As Lyman notes both on his blog and in the New York Times, there is another reason why we should care from a societal perspective. In comparing the ideal fertility rate from the General Social Survey with the total fertility rate that is actually observed, there is a widening gap. Women and men say they want 2.5-3 kids, but are only having 1.5-2 kids. This work shows there has always been a difference between ideal and achieved fertility, but that it is widening in the past decade. It is now reaching the differences seen back in the 1970s and 1980s, or when fertility rates began increasing again.

In separate research, the New York Times asked young adults why they are not having as many children and the answers were enlightening and also probably what you would expect. A lot of the top reasons given are financial in nature — childcare costs, student debt, housing affordability, etc. These issues are clearly in play here in Oregon where we have one of the highest childcare costs nationwide and among the worst housing affordability. However some reasons from the survey were clearly personal — wanting more leisure time or personal freedom, delaying marriage or not having a partner yet, etc. Overall, research points toward the rising age at which people marry being a key factor, as birthrates have not changed much after adjusting for marital status. As such, the delay in marriage is driving the delay in having children.

Another factor social scientists point to is gender equality. With rising educational attainment and employment opportunities, marriage and motherhood have become more of a choice. Complicating the picture further is the fact that women face an earnings penalty after having kids, and the U.S. has fewer policies supporting working families than many other developed countries. All of this may also contribute to the rise of stay-at-home moms in the past decade or so.

Finally, it must be noted that, at least initially, the decline in birthrates were in large part due to falling teen pregnancies. And yes, these declines began long before 16 and Pregnant and Teen Mom were on the airways. Overall, this is a great development from a social and human capital perspective. There is also some evidence that what we are seeing in annual birthrates is a bit misleading. Research from Pew shows that the by the time women are in their 40s, they have had the same number of children as the previous generation. This is sometimes called the tempo effect, that births are delayed and not foregone. That said, Lyman models a few scenarios including the tempo effect and birthrates by age or generational cohorts. He finds that the overall lower birthrate is here to stay for the foreseeable future, barring big changes in societal behavior and norms.

While we don’t have as good of data here in Oregon, we clearly see this shift in the age of the mother. The birthrate for first-time moms is rising substantially for 30- and 40-somethings, while it is declining for teens and 20-somethings.

What is striking to me when I look at the population forecast Kanhaiya in our office produces, is that Oregon will see fewer children in the future. This is not just a falling birthrate, but an outright decline in the total number of children in the state. In 2030, Oregon will have one million more residents than we did back in 2007, when we last had replacement rate fertility (almost), however the number of kids will be actually be lower. And this is in a state that sees strong net in-migration!

All told, fertility shapes many issues across the country from immigration to education, housing to labor supply. The U.S. and Oregon are expected to continue to see very low birthrates in the years to come. To the extent that these lower birthrates represent better economic opportunities for women and are more of a revealed preference, the declines are not worrisome at the personal level and should even be celebrated.

However, from a macro level, demographic imbalances can be problematic. As we work through the current demographic issues of Baby Boomer retirements, we are also sowing the seeds of the next imbalance in the coming decades.

Academic studies generally find that offering cash or tax incentives for parents produces modest and temporary boosts to birthrates, which tend to be more cultural in nature. As such, barring any substantial shifts in societal norms or larger flows of working-age international migrants, Oregon and the U.S. will likely need to adjust to shifting demographic trends in the decades ahead.

Stay tuned for Part 3 of the series when we will explore deaths a bit further.

Posted by: Josh Lehner | May 21, 2019

Oregon Births and Deaths, Part 1

Oregon’s ability to attract and retain working-age households is the key driver of our stronger economic growth compared to most other states. The influx of new residents provide young, skilled labor for Oregon firms looking to hire and expand. These new residents also increase demand for housing, schools, breweries, nail salons and the like, which generates further economic activity. However, the fact that Oregon is a magnet state does one other thing. It keeps Oregon’s population from declining. As the number of deaths increase and number of births stagnate, the natural increase in Oregon’s population will turn negative in a few years. This has never happened in Oregon, at least not in our modern history. But it will in the middle of next decade based on our office’s demographic outlook.

If we step back and look at Oregon’s population growth, it has largely matched expectations and even come in a bit higher than our forecast from a handful of years ago. However the composition of that growth is shifting somewhat more than expected. Births continue to come in below expectations, while deaths are rising faster than an aging population alone would suggest. As such, Oregon’s rate of natural increase has been shrinking faster than expected. Oregon is becoming more and more reliant upon net in-migration for population growth.

Of course these population and demographic trends vary across the state. Over the past couple of years, 16 of Oregon’s 36 counties have experienced strong natural increases in their populations. These are primarily the counties in the Willamette Valley, Central Oregon, and then in Northeastern Oregon. The larger, and faster-growing urban areas that attract working-age households do see births continuing to outnumber deaths. Additionally, counties with larger minority populations also tend to see better gains due to higher birthrates relative to the non-Hispanic white population.

Another 6 counties see the number of births and deaths effectively offset.

That means 14 of Oregon’s 36 counties are seeing sizable declines as deaths outnumber births. Now, only a few counties have seen their total population decline, meaning that the influx of new residents moving into the area is generally enough to offset changes or declines in the natural increase. That said, aging demographics will have a large impact on every county in the state as discussed previously.

Bottom Line: As the number of deaths rise and births stagnate, Oregon is increasingly reliant upon net in-migration for population growth. Given that migration is pro-cyclical, this will likely contribute to economic volatility moving forward. Additionally, the population outlook is the key driver of every long-term forecast our office does. As such, anything that puts migration at risk — housing affordability, natural disasters, etc — potentially has big implications for Oregon’s economy, and public sector budgets.

We will dig into births in Part 2 and examine one reason deaths are rising faster in Part 3. Stay tuned.

Posted by: Josh Lehner | May 15, 2019

Economic and Revenue Forecast, May 2019

This morning the Oregon Office of Economic Analysis released the latest quarterly economic and revenue forecast. For the full document, slides and forecast data please see our main website. Below is the forecast’s Executive Summary.

The economy is on firmer ground today following a rocky start to the year. The combination of softer economic data and concerns over potential policy mistakes raised the risk of recession. However as the data flow improves, and the Federal Reserve’s dovish pivot, recession fears have faded. That said the economy is slowing down following last year’s tax cut fueled growth. Economic gains over the upcoming 2019-21 biennium will be more in-line with underlying growth in the labor force and productivity. Encouragingly, the latter has shown signs of life recently due to the tighter labor market. The recent escalation in the trade war is a wildcard. It is too soon to know how disruptive it may be to global supply chains as developments are ongoing.

While the U.S. economy is just now beginning to slow, Oregon’s has for the past few years. Now, the state continues to see healthy rates of growth. However Oregon is no longer significantly outpacing the nation like it was a couple of years ago. Overall, this was not unexpected. So far this biennium, actual employment, personal income, and population in Oregon have closely tracked the forecast.

Looking forward, Oregon’s economic outlook calls for ongoing, but slower growth this year and next. The tighter labor market, somewhat fewer in-migrants, fading federal fiscal stimulus and past interest rate hikes all cool economic activity. That said, Oregon continues to hit the sweet spot. Growth is strong enough to keep up with a growing population but also deliver economic and income gains to Oregonians. This pattern is expected to continue until the next recession, whenever it comes.

While economic growth in Oregon is slowing down as expected, the same cannot be said for our General Fund tax revenues.  During the peak tax filing season, Oregon saw record collections of both personal and corporate income taxes. Both are up more than 50% relative to this time last year. Now, most other states that depend on income taxes have also experienced very big years. However, tax collections have come in far above what underlying economic gains could reasonably support.

Clearly, taxpayer responses to federal tax reform are playing a large role in these record collections. Law changes have broadened the tax base for some business income, and have given taxpayers the incentive to shift the timing of their payments.  With lower tax rates in 2018, filers tried to recognize as much income as possible during the tax year. How much liability remains to be realized in future years is an open question.

Projected 2017-19 Net General Fund resources are up $883 million from the May 2019 forecast.  Including Lottery revenues, net resources are up $908 million.  As a result, Oregon’s unique kicker law has been triggered for both personal and corporate taxes.  A record (in dollar terms) $1.4 billion personal kicker is projected for 2019-21, while corporate tax revenue of $616 million is projected to be dedicated to K-12 education spending.

Given Oregon’s economic and revenue forecast history, kicker payments of this size are a once a decade event. The median filer will receive a kicker credit of $338 next year, while the average filer will receive a credit of $691.  Filers in the top 1% of the income distribution will receive a credit of nearly $14,000.

Heading into the next biennium, uncertainty about the performance of the regional economy will become paramount.  Growth will certainly slow to a more sustainable rate in the coming years, but the path taken to get there is unknown.  Capacity constraints, an aging workforce, monetary policy drags and fading stimulus all put a lid on growth a couple of years down the road.  However, the exact timing and steepness of this deceleration is difficult to predict, leading to a wide range of possible revenue outcomes for the 2019-21 biennium. 

See our full website for all the forecast details. Our presentation slides for the forecast release to the Legislature are below.

Posted by: Josh Lehner | May 8, 2019

Labor Supply Update and Thoughts on the Outlook

As Oregon’s labor market continues to transition down to more sustainable rates of growth, our office and our advisors keep coming back to the question of where the labor will come from. Obviously there are two main sources: current residents who are not working today and new residents moving into Oregon. The real question is how much labor can we reasonably expect from either group as we enter into the eleventh year of the expansion? We’re releasing our latest forecast next week, so you’ll have to wait until then to know for sure. However this post will highlight the latest data and some of the conversations we have had recently with our advisory groups.

First, the share of prime working-age Oregonians with a job today is back to where it was prior to the Great Recession, and even a bit higher. This is tremendous economic news and one big reason Oregon’s job gains have outstripped the average state. That said, job growth among this age group in the past couple of years has essentially matched population gains, meaning the employment rate has held fairly steady. And this steady employment rate is a key driver in the slower statewide job gains in recent years. This largely reflects the fact that much of the slack is gone. There is no longer an army of unemployed Oregonians waiting around for a job. Firms must cast a wider net in recruitment and dig deeper into their resume stack to fill open positions. (Note that the Oregon data is based on a smaller sample size and can be noisy.)

Steady prime-age EPOP suggests job growth moving forward will be more closely tied to the underlying gains seen in the population. Now, there does remain some room for further improvements as the employment rates were higher back in 1999 and 2000, or the peak of the technology-led expansion. Regaining such employment rates would keep Oregon’s job growth stronger, for longer, and mark further economic improvements. However, even regaining the 2000 rates of employment would not likely alter our baseline forecast too much given the aging demographics, increasing retirements, slowing migration patterns and the like. That said, economically, we would love to see further gains in EPOP and as the expansion continues, we likely will to some degree.

Previously, our office dug into 3 potential pools of underutilized workers which should they return to the workforce in greater numbers, would push Oregon job growth rates higher. These groups include: teenagers, stay-at-home moms, and those with self-reported disabilities.

Second, population growth, and migration specifically, slows in a mature expansion. People follow the jobs. 60% of new Oregon residents say they moved here for a job or in search of work. So as job growth slows, so too will migration. This slowdown has been built into our office’s forecast for some time now. However the exact year-to-year changes can be noisy and hard to predict. Overall our office’s population forecast has been raised relative to a few years ago due to stronger-than-expected migration in 2016 and 2017. That said, population growth in 2018 was a noticeable step down relative to recent years. A sharper deceleration than expected. But what is very clear in the data is how widespread this slowdown was last year. (Note the following charts are based on data from our friends at Portland State’s Population Research Center, who provide the official state estimates between each decennial Census. The Census Bureau has its own set of Oregon estimates.)

Slower gains were seen across age groups. The exception being older cohorts for the most part which is about Baby Boomers aging from their 50s into their 60s and 70s, and not about retiree migration which is small. Also, the number of children in Oregon is largely holding steady or declining somewhat. As promised before, I will come back to the birthrate issue at some point in the near future.

The slower population growth was also seen across all regions of the state. Even Bend is slowing some.

Additionally, given that underlying working-age population growth is a key determinant in labor supply and the economic outlook, our office recently dug into expectations for county level growth in the 2020s.

Bottom Line: Job growth in Oregon has been slowing down to more sustainable rates in recent years and is expected to continue to do so. Eventually, once all of the slack is gone from the economy, job growth will match population gains. This has been the nature of our outlook for some time. The tricky part is figuring out how long and to what degree this transition takes place. There is still room to run for this economic expansion and the longer it lasts the more progress we should see. Our office will release a new forecast next Wednesday and this, being the May forecast in an odd year, will also set the revenue bar for the 2019-21 BN budget and form the basis of any future kicker calculations.

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